It is the beginning of the year again, and that means that employers must be on the lookout for new employment regulations taking effect in California. This year is no different. Here are three key changes among the new legislation taking effect.
Strong management is not only essential for productivity and morale, but also a critical component of legal risk management. Many employment-related claims do not arise from intentional misconduct, but from inconsistent, poorly trained, or inattentive management practices. When managers fail to follow established policies or apply them unevenly, businesses can face significant legal exposure.
On December 23, 2025, the U.S. Department of Homeland Security (“DHS”) issued a Final Rule that significantly changes how cap-subject H-1B visas are allocated. Historically, employers registered candidates and relied on a random lottery because demand far exceeded the annual cap of 65,000 visas, plus an additional 20,000 for individuals with advanced U.S. degrees. Under the prior system, employers had roughly a 30% chance of being selected to file a full H-1B petition, regardless of the wage level or skill requirements of the position.
A federal judge has temporarily stopped California from expanding its labor board’s reach into private-sector labor disputes that are traditionally overseen by the National Labor Relations Board (NLRB). The December 26 decision blocks major provisions of a 2025 California law that would have allowed the state to step in when the federal labor agency is delayed or inactive. For employers in California—particularly those dealing with union organizing efforts or potential unfair labor practice (ULP) claims—the decision underscores that federal law and the NLRB remain the primary authorities governing private-sector labor relations in California, and generally nationwide.
On December 11th, President Trump signed an executive order directing federal agencies to review and potentially challenge certain state laws regulating artificial intelligence, including those that affect workplace decision making. While the order signals increased federal scrutiny of state AI regulation, it does not eliminate or suspend any existing laws. In California, AI-related employment requirements—such as disclosure obligations and protections against discriminatory decision-making—remain fully in effect unless and until a court or Congress takes action.
California businesses are already currently required to provide notifications of any data breach to the affected individuals “in the most expedient time possible and without unreasonable delay.” If a breach requires notice to more than 500 California residents, the business must provide a copy of the notification, to the Attorney General, who will make public the notification on its website.
California remains one of the most restrictive states on non compete agreements, and the state continues to uphold a long standing public policy that promotes employee mobility and competition. Under Business and Professions Code Section 16600 and related amendments, post employment non compete clauses are generally void and unenforceable in California, even if the contract was signed outside the state or before the employee worked in California. California views that limiting a worker’s ability to pursue a livelihood suppresses wages and stifles innovation.
A recent federal court ruling in California has created uncertainty for businesses that use website tracking technology. On November 18th, the Southern District of California allowed a lawsuit against Adidas to move forward, finding that its use of tracking pixels may violate the California Invasion of Privacy Act (“CIPA”). The court concluded that Adidas collected user data without obtaining affirmative consent—despite having a privacy policy—because that policy was not clearly presented to visitors. This ruling conflicts with other California decisions that have held there is no reasonable expectation of privacy in data like IP addresses and device identifiers, suggesting that California courts are split on how CIPA applies to common tracking tools.
Even in the most well-managed workplaces, issues such as harassment, discrimination, retaliation, or policy violations can arise. When they do, employers have both a legal and business obligation to respond quickly and appropriately. A prompt, thorough, and fair workplace investigation not only helps resolve internal disputes but can also protect business from legal liability.
The California Courts of Appeal in Mora v. C.E. Enterprises, Inc. recently upheld a common pay model used by auto dealerships and similar businesses. The Court confirmed that a hybrid structure of paying service technicians an hourly wage, supplemented by a bonus based on completed “flag hours,” fully complies with state wage-and-hour law, including the rules governing piece-rate compensation under Labor Code § 226.2. The decision is a win for employers.
